Role of alternative finance

Overall size of the market:

Netherlands is the 3rd country regarding online alternative finance by market volume in Europe, excluding the United Kingdom. The Netherlands is the market leader in both debt-based securities and peer to-peer business lending, whilst also performing relatively strongly in rewards-based crowdfunding and equity-based crowdfunding, where it is the third largest market for these models in Europe (excluding the UK)
The total amount raised in 2015 was EUR 111m, up from EUR 78m in 2014 and EUR 46m in 2013. The growth rate increased from 42% in 2014 to a sizeable 70% in 2015.

Some examples include:
- VoorDeKunst is a donation based platform for the creative sector, founded in 2010.
- GeldVoorElkaar is the largest P2P business lending platform and started in 2010.
- Oneplanetcrowd launched in 2012, it offers loans and convertible loans to sustainable projects through its platform.
- Collin Crowdfund and Kapitaal Op Maat are both P2P business lending platforms that started their activities in 2013.
- Symbid is an equity-based platform that launched in 2011.

Peer-to-peer business lending had the highest total volume nationally, growing 34% from EUR 55.2 million in 2014 to EUR 74m in 2015. This represents the highest peer-to-peer business lending figure in Europe (excluding the UK).

Other models that are quite popular in Netherlands are Debt-based securities with a volume equal to EUR 8.3 million and Real Estate Crowdfunding with a volume of EUR 0.5 million.

Regulatory Context

Evidence

Is there a specific national regulation in place applying to crowdfunding?

The Dutch Ministry of Finance published the new ‘Crowdfunding Decree’ that has entered into force as per 1 April 2016.

-By the Decree the investment limits applicable to loan-based and equity-based crowdfunding platforms are raised.
-According to the decree, loan-based and equity-based crowdfunding platforms need to conduct an investors test in order to assess whether the investment is sound (verantwoord) for this particular retail investor.
- Additionally the crowdfunding platform should provide the investor either the opportunity to actively confirm the investment within 24 hours, failing which the investment will be cancelled, or the opportunity to terminate the investment in an easy manner without any costs being charged within 24 hours.
-Any loan based or equity based crowdfunding platform needs to fill out the monitoring form that enables the AFM to literally monitor the crowdfunding market.
-Some additional rules have been settled for lending-based crowdfunding. These rules aim to ensure the reliability (betrouwbaarheid) of each policy maker and co-policy maker, the safety of the platforms and to safeguard the ethical running of the business.

Equity model: the platform is generally held to be an investment firm (beleggingsonderneming) and is required to obtain a MiFID license.

Lending model: the platform requires a dispensation from the prohibition to intermediate with regards to redeemable funds. If the platform offers or intermediates in the offering of consumer credit, it requires a license as a consumer credit offeror. As the platform generally does qualify as a credit institution because it does not make its main business from (i) attracting redeemable funds (itself) from the public and (ii) providing credit on its own account, the platform using the Lending model does not require a banking license.

Donations and Rewards models: the AFM confirmed that it currently does not supervise any Crowdfunding platforms using the donations model or the rewards model.

- Equity and Lending models: if a fundraiser offer securities, such as shares in a private or public company or bonds, the fundraiser is subjected to a prospectus requirement under the Prospectus Directive as implemented in the Dutch Financial Supervision Act. The prospectus needs to be approved by the AFM. The main exemption applicable in Crowdfunding campaigns is the exemption to offer one category of securities to the public in the Netherlands up to a total offering size of less than EUR 2,500,000 provided that a prescribed warning text and pictogram is included in any offering or marketing document.
- Donations and Rewards models: the prospectus requirement does not apply.

Support policies

Overview:

The Dutch regulatory framework, applicable to both debt-based crowdfunding and equity-based crowdfunding, was updated on the 1st April 2016.
Crowdfunding platforms in the Netherlands are expected to follow a set of best practices that encourage investors to invest appropriately by following best practices such as diversification. Alongside this, the platforms must adhere to a list of requirements broadly covering areas of risk, ethics, transparency and consistent operational practices. It will be of utmost importance for the regulatory bodies and businesses to monitor the growth of the market given these new rules.

In Rotterdam, studio ZUS set up a successful crowdfunding campaign for the Luchtstingel wooden footbridge In Rotterdam. The bridge was created out of local frustration due to the unsafelack crossing of a highway, which led to citizens coming together to crowdfund studio ZUS’s idea. Each backer got their name on a plank on the bridge. After 8,000 local people funded the project, Rotterdam City decided to top up the crowdfunded funding with a grant so that the studio could complete the project. The campaign has since led to the development of a series of new initiatives related to the Luchtstingel, including the development of an events space and a roof garden.

Additional insight

Success story of crowdfunding platfroms for R&I:

NAME: Crowdfunding voor natuur
DESCRIPTION: this is a R&I oriented platform focusing on the issue of climate change. The platform is very successful, 80% of the crowdfunding campaigns on the Voor je Buurt platform are successfully funded, and an average of 100 supporters contribute to each campaign. It has a donation-based model. They believe that the winning strategy is making transparent the process of crowdfunding.
LINK: https://www.voorjebuurt.nl

Success story of crowdfunding projects for R&I:

PROJECT NAME: JackSavior
PLATFORM: Kickstarter
DESCRIPTION: The project aimed at designing a new type of audio jack, less subjected to headphone failures. The success seems to rely on the characteristics of the product launched. The JackSavior audio jack is cheaper to manufacture and easier to automate than normal audio jacks. Moreover, Jack Savior is essentially stronger than normal audio jacks.
AMOUNT RAISED: € 8,503 out of € 2,000
LINK: https://www.kickstarter.com/projects/bvansambeek/jacksavior-the-smaller-...

Best practice initiatives:

In order to boost crowdfunding activities in the country, the Dutch Crowdfunding Awards, designed by the campaign manager of Symbid, focus on showcasing the best and most supported crowdfunding cases in the Dutch industry.

Civic crowdfunding is a new upcoming type of crowdfunding in the Netherlands. Projects in the public space and/or projects with a special focus on serving local communities are being financed more and more by crowdfunding. An example is the crowdfunding campaign for the (re)building of a regional hospital that raised €10,8 million.
What are the biggest challenges?

The effects of the new regulations regarding investor tests are being disputed by the P2P lending platforms. It is their point of view that the tests imply a heavy administrative burden for the platforms and discomfort for the retail investors and therefore will hinder the use of crowdfunding instead of fostering the use of crowdfunding. In the coming year, it will show if the industry is right in disputing the effects of rules. The AFM has already announced that the new regulation is seen as a pilot.

Banks have not entered the crowdfunding market on a grand scale yet. One bank launched their own platform, but closed it after a couple of years. Generally speaking, the banks seem to have a positive outlook, but still have a "wait-and-see approach" towards the industry and continue to cooperate with existing platforms to co-finance projects.

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